ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS

9 Months Ended

Sep. 30, 2021

ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS

ACQUISITION

Sempra Mexico

ESJ

In March 2021, IEnova completed the acquisition of Saavi Energía’s 50% equity interest in ESJ for a purchase price of approximately $65 million (net of $14 million of acquired cash and cash equivalents) plus the assumption of $277 million in debt (including $94 million owed from ESJ to IEnova that eliminates upon consolidation). IEnova previously accounted for its 50% interest in ESJ as an equity method investment. This acquisition increased IEnova’s ownership interest in ESJ from 50% to 100%. We accounted for this asset acquisition using a cost accumulation model whereby the cost of the acquisition and carrying value of our previously held interest in ESJ ($34 million) were allocated to assets acquired ($458 million) and liabilities assumed ($345 million) based on their relative fair values. ESJ owns a fully operating wind power generation facility with a nameplate capacity of 155 MW that is fully contracted by SDG&E under a long-term PPA. IEnova recorded a $190 million intangible asset for the relative fair value of the PPA that will be amortized over a period of 14 years against revenues. ESJ is constructing a second wind power generation facility with a nameplate capacity of 108 MW that we expect will be completed in the first quarter of 2022.

DISCONTINUED OPERATIONS

In April 2020, we completed the sale of our equity interests in our Peruvian businesses, including our 83.6% interest in Luz del Sur and its interest in Tecsur, to an affiliate of China Yangtze Power International (Hongkong) Co., Limited for cash proceeds of $3,549 million, net of transaction costs and as adjusted for post-closing adjustments, and recorded a pretax gain of $2,271 million ($1,499 million after tax).

In June 2020, we completed the sale of our equity interests in our Chilean businesses, including our 100% interest in Chilquinta Energía and Tecnored and our 50% interest in Eletrans, to State Grid International Development Limited for cash proceeds of $2,216 million, net of transaction costs and as adjusted for post-closing adjustments, and recorded a pretax gain of $628 million ($248 million after tax).

In the three months and nine months ended September 30, 2020, the pretax gains from the sales of our South American businesses are included in (Loss) Gain on Sale of Discontinued Operations in the table below and the after-tax gains are included in (Loss) Income from Discontinued Operations, Net of Income Tax, on Sempra’s Condensed Consolidated Statements of Operations.

Summarized results from discontinued operations were as follows:


DISCONTINUED OPERATIONS
(Dollars in millions)
	Three months ended September 30, 2020(1)		Nine months ended September 30, 2020(2)
Revenues	$	—	$	570
Cost of sales	—		(364)
(Loss) gain on sale of discontinued operations	(16)		2,899
Operating expenses	—		(66)
Interest and other	—		(3)
Income before income taxes	(16)		3,036
Income tax benefit (expense)	9		(1,186)
(Loss) income from discontinued operations, net of income tax	(7)		1,850
Earnings attributable to noncontrolling interests	—		(10)
(Losses) earnings from discontinued operations attributable to Sempra	$	(7)	$	1,840

(1) Represents post-closing adjustments related to the sale of our equity interests in our Chilean businesses.

(2) Results include activity until the sale of our Peruvian businesses on April 24, 2020 and Chilean businesses on June 24, 2020.

As a result of the sales of our South American businesses, in the second quarter of 2020, we reclassified $645 million of cumulative foreign currency translation losses from AOCI to (Loss) Gain on Sale of Discontinued Operations, which is included in (Loss) Income from Discontinued Operations, Net of Income Tax, on Sempra’s Condensed Consolidated Statements of Operations.